SEC to Delay Dissident Director Rule

The Securities and Exchange Commission will delay a rule making it easier for investors to oust corporate directors, a step that may give banks a reprieve from shareholders seeking retribution over the financial crisis.

SEC Chairman Mary Schapiro has backed away from approving a rule this year to let hedge funds, institutional investors and shareholder groups put candidates on corporate proxy statements, said people familiar with the matter. Commissioners are unlikely to vote until 2010, meaning the provision would not be in effect for next year's board elections at companies such as Citigroup Inc.

The SEC proposed its so-called proxy access rule in May, with Schapiro saying the billions of dollars of losses suffered by financial companies raised "serious questions" about oversight by boards of directors.

A final vote had been scheduled for November, the sources said. The agency is planning a delay to give its staff more time to review more than 500 comment letters, many of which raised concerns, these people said.

SEC spokesman John Nester declined to discuss the agency's timetable for approving a rule.

Investor anger at financial companies peaked at this year's annual meetings. Bank of America Corp. shareholders stripped Chief Executive Officer Ken Lewis of his chairman post in April after he was faulted in the company's purchase of Merrill Lynch & Co. Lewis announced Sept. 30 that he will leave B of A by yearend.

More than 25% of Citigroup shareholders withheld votes for board member John Deutch, who led the company's accounting and risk management committee, and for Michael Armstrong, who preceded him in the post. They were faulted by investors for oversight failures after Citigroup lost $28 billion last year. Under current rules, board elections require distributing a ballot with the names of dissident nominees. Unions and pension funds say the expense of sending a separate proxy is a barrier for most investors.

The SEC proposal would let investors who have held at least 1% of a large company's shares for one year nominate a limited number of directors on the corporate proxy. Shareholders would have to own bigger percentages of a smaller company's stock in order to nominate board members.